How I Almost Threw my Bonus Down the Drain

 A few months ago, I got promoted at work! I called my dad to share the news.  After we discussed the new level and responsibilities, I get excited about the larger salary. “I have more cash now!  I can travel more, buy a new suit, move to New York City . . .”

As I continued listing items, my dad jumped in, “Don’t start spending more just because your salary increased. Buy one special item to celebrate and don’t change your spending habits.”

In responce, I was annoyed.  I thought, “I’m the personal finance guru in the family. Why are you lecturing me?

The next day, I thought more about my dad’s comments—still confident he shouldn’t be lecturing me, the expert,—and decided I’d do one better. “I won’t buy anything to celebrate.  The summer was so fabulous that I don’t need anything extra.”  I went to South Africa for 2.5 weeks and went to the beach in Cartagena, Colombia for a week.  I also went to NYC a lot.

However, deep-down inside, I still wanted to buy something to celebrate the promotion.  Over the next few weeks, I found myself frequently thinking, “I just got promoted, and I am not buying anything big to celebrate.   I can splurge a little. It’s only an extra $3-$10.”   

“What does it matter if I buy lunch at Whole Foods instead of eating at home?”

“I’ll just take a cab this one time. I’m too tired to walk.”

After 2 weeks of spending a little more here and there, I noticed I was running out of cash.  I have a $60 per week cash allowance ($240 monthly) that I spend however I want without tracking.  I had almost finished the month’s cash during the week #2!  Then I checked my credit card balance and found an extra $150 on here! WTF! By splurging on $3-$10 here and there, I’d spent about $360 in 2 weeks without noticing.

Right then and there, I decided to buy a bike to celebrate. I admired how people in Cartagena, Colombia completed their daily errands on foot.  I wanted to buy a bicycle and start riding to work, to the grocery store, and for other errands, so I could incorporate more exercise into my daily life.

My New Bike - Schwinn Women's Searcher

Once I choose a concrete gift, I stopped creating little ways to treat myselfI was content. I got a $420 bike on sale for $350 ($70 savings) and spent $150 on accessories (helmet, light, etc).  Every time I rode or saw the bike, it reminded me of my travels and commitment to living a healthy, fabulous life.

If I had bought the bike initially, I would have spent only $570, instead of spending a total of $930, with $360 wasted on crap.

I hated to say it, but my dad was right.  The experience reminded me that psychological factors affect my buying habits.  When I tried to sweep the feelings under the rug, they trickled out, and I spent on little extras.  I had to admit my feelings to myself before I could stop hemorrhaging cash.

Sometimes the best answer is to go ahead and spend the cash—like in this case where I had the money.  Other times, the best solution is to understand why you want to spend money and find a cheaper or free alternative that provides a similar feeling.

Being Financially Fab means being aware of why you spend money. When you understand your motivations, you have a hell of a lot more control over your cash. 😉

When was the last time you were in a similar situation?  What did you do? Do you know how feelings and psychology affect your financial decisions?


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